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EUROPEAN COMMISSION DG Competition
Case M.8254 - HP / PRINTER BUSINESS OF SAMSUNG
ELECTRONICS
Only the English text is available and authentic.
REGULATION (EC) No 139/2004
MERGER PROCEDURE
Article 6(1)(b) NON-OPPOSITION
Date: 04/04/2017
In electronic form on the EUR-Lex website under document
number 32017M8254
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË Tel: +32 229-91111. Fax: +32 229-64301. E-mail: [email protected].
EUROPEAN COMMISSION
Brussels, 4.4.2017
C(2017) 2296 final
To the notifying party:
Subject: Case M. 8254 – HP / PRINTER BUSINESS OF SAMSUNG
ELECTRONICS
Commission decision pursuant to Article 6(1)(b) of Council
Regulation No 139/20041 and Article 57 of the Agreement on the
European Economic Area2
Dear Sir or Madam,
(1) On 28 February 2017, the European Commission received notification of a
proposed concentration pursuant to Article 4 of the Merger Regulation by which
the undertaking HP, Inc. ("HP", United States of America) acquires within the
meaning of Article 3(1)(b) of the Merger Regulation control of the whole of the
printer business of Samsung Electronics Co., Ltd ("Samsung's Printer Business",
Republic of Korea) by way of purchase of shares and assets (the "Proposed
Transaction")3. HP is referred to as the "Notifying Party" and HP and Samsung's
Printer Business are collectively referred to as "Parties".
1 THE PARTIES
(2) HP is a multinational technology company that manufactures and sells electronic
devices, including PCs and printers. HP markets inkjet and laser printers geared
1 OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the Treaty on
the Functioning of the European Union ('TFEU') has introduced certain changes, such as the
replacement of 'Community' by 'Union' and 'common market' by 'internal market'. The terminology of
the TFEU will be used throughout this decision. 2 OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement'). 3 Publication in the Official Journal of the European Union No C 71, 7.3.2017, p. 4.
PUBLIC VERSION
In the published version of this decision, some
information has been omitted pursuant to Article
17(2) of Council Regulation (EC) No 139/2004
concerning non-disclosure of business secrets and
other confidential information. The omissions are
shown thus […]. Where possible the information
omitted has been replaced by ranges of figures or a
general description.
2
towards a range of needs to consumers and businesses. HP's offerings include (a)
personal computing and other access devices; (b) imaging and printer-related
products and services.
(3) Samsung Electronics Co., Ltd is a multinational company that is a major supplier
of consumer electronic devices (including televisions, monitors, air conditioners,
refrigerators, washing machines, and printers), information technology and
mobile communication systems (including mobile phones, smartphones, and
tablets), and device solutions (such as semiconductors and mobile application
processors).
(4) Samsung's Printer Business is a global supplier of printers and printer-related
products and services for home office and business use.
2 THE OPERATION
(5) Pursuant to the master purchase agreement signed on 12 September 2016, HP will
acquire sole control of the Samsung's Printer Business. Specifically, the Proposed
Transaction will be carried out through an acquisition by HP of all of Samsung's
direct and indirect rights, titles and interests in and to all of the issued and
outstanding capital stock of a number of Samsung subsidiaries as well as other
assets to be transferred, including contracts, products, permits, and IP and other
rights related to Samsung's Printer Business. Upon completion of the Proposed
Transaction, Samsung's Printer Business will be a wholly-owned subsidiary of
HP.
(6) Therefore, the Proposed Transaction constitutes a change of control pursuant to
Article 3(1)(b) of the Merger Regulation.
3 EU DIMENSION
(7) The undertakings concerned have a combined aggregate world-wide turnover of
more than EUR 5 000 million (HP: EUR 46 365 million; Samsung's Printer
Business EUR […]; combined EUR […])4. Each of them has an EU-wide
turnover in excess of EUR 250 million (HP: EUR […]; Samsung's Printer
Business EUR […]), but they do not achieve more than two-thirds of their
aggregate EU-wide turnover within one and the same Member State.
(8) The notified operation therefore has an EU dimension pursuant to Article 1(2) of
the Merger Regulation.
4 RELEVANT MARKETS
4.1 Relevant product markets
(9) HP and Samsung's Printer Business are both active in the supply of branded office
automation equipment. While office automation equipement includes copiers,
4 Turnover calculated in accordance with Article 5 of the Merger Regulation.
3
printers and fax machines, the Parties overlap only in printers (namely single
function printers ("SFPs") and multi functional peripherals ("MFPs")).
Furthermore, Samsung's Printer Business and HP are also active in the upstream
market for supply of unbranded printers to other manufacturers.5
4.1.1 Supply of branded and unbranded office automation equipment
(10) In its previous decision Canon/Océ, the Commission concluded that the supply of
unbranded office automation equipment should be distinguished from the supply
of branded office automation equipment. The Commission considered that the
supply of unbranded office automation equipment relates to the upstream supply
market where original equipment manufacturers (OEM) sell office equipment
directly to other manufacturers or wholesalers who then resell this equipment
under their own brand to dealers or end customers, in competition with the
original manufacturers. The supply of branded office automation equipment
relates to the downstream supply of all equipment either manufactured and
branded or purchased on an OEM basis and rebranded by the purchaser. This
downstream supply encompasses sales of branded products, including direct sales
to end-users and indirect sales through wholesale distributors or dealers.6
(11) The Notifying Party agrees with the deliniation made in Canon/Océ between the
supply of (i) unbranded and (ii) branded printers.
(12) The market investigation in this case did not provide any new elements justifying
a departure from Commission's previous decisions.
(13) In line with its previous decisional practice, for the purpose of this decision, the
Commission considers that the supply of branded office automation equipment
belongs to a separate relevant market than that of the supply of unbranded office
automation equipment.
4.1.2 Large format printers and regular format printers
(14) The Commission in previous decisions distinguished the regular format printers
which use A3 and A4 papers from the large format printers which function on A2
or larger papers and other supports.7
(15) The Notifying Party agrees that large format printers should be viewed as a
separate market and submits that end applications in large format (printing
signage and display items, computer aided design or graphic arts) are different
from the ones in regular format (for use in home and office). Further, it submits
that Samsung's Printer Business does not produce or sell any large format printers
(A2 or larger).
(16) In line with its previous decisional practice, for the purpose of this decision, the
Commission considers that the supply of large format printers should be
distinguished from the supply of regular format printers.
5 However, the Parties do not sell branded office automation equipment of third party manufacturers and
therefore are not active in the wholesale distribution of branded printers. 6 Commission decision of 22 December 2009 in Case M.5672 Canon/Océ, paragraphs 9 and 11. 7 Commission decision of 22 December 2009 in Case M.5672 Canon/Océ, paragraphs 13 and 14.
4
4.1.3 Supply of regular format printers
(17) The Notifying Party submits that the relevant product market is the market for
regular format printers, without a need for futher segmentation by functionality
(SFPs vs MFPs), colour (mono vs colour) and speed. The Notifying Party claims
that significant price and technology convergence has taken place between low,
medium and high speed printers, SFPs and MFPs, and between mono and colour
printers. The Notifying Party considers that parameters such as speed, colour and
other functionalities are just elements of one market for regular format printers
and that there are a number of supply-side considerations which make such
potential segmentations irrelevant.
(18) The Notifying Party argues that from the demand side perspective, purchasers of
one type of regular format printer regularly consider and switch to alternative
printers from other segments in the market. The Notifying Party argues that
customers view printers of different functionalities, colour or mono, or different
speeds as interchangeable and that one of the reasons is that the difference of cost
per page between different types of printers has progressively decreased due to
technological developments and innovation in the industry. The Notifying Party
claims that today the average cost per page is similar across printer types.
(19) From the supply side perspective, the Notifying Party argues that printer suppliers
are able to switch production across the various segments of the regular format
printers market in the short term and without incurring significant incremental
costs. Finally, the Notifying Party claims that due to the commonality of assets,
most of regular format printer manufacturers offer a wide range of printer models
across all segments.
(20) The Commission has assessed during its investigation the various possible
segmentations retained previously (SFPs vs MFPs; mono vs colour; slow,
medium and fast printers) and whether a segmentation by paper size A3 vs A4
would be appropriate.
4.1.3.1 Single function vs. Multifunctional office equipment
(21) Within regular format office authomation equipment (A3/A4 paper size), the
Commission found in previous decisions that a distinction could be made between
single function office equipment (SFPs) and multifunctional peripherals (MFPs).8
With regard to single function devices, the Commission considered that
photocopiers, printers and fax machines may constitue three distinct product
markets.9 In the most recent decision Xerox/ Affiliated computer services the
Commission noted that the market investigation indicated the customer needs in
the printing business are rapidly evolving and, among other things, the increasing
displacement of single function devices by multifunction peripherals.10 However,
it ultimately left the market definition open.
8 Commission decision in Case M.5672 Canon/Océ, of 22 December 2009, paragraphs 16 – 19.
9 Commission decision in Case M.4434 Ricoh/Danka of 8 December 2006.
10 Commission decision of 19 January 2010 in Case COMP/M.5666 Xerox/ Affiliated computer services,
paragraphs 20-29
5
(22) SFPs are products that are only able to execute one particular task, while MFPs
combine at least two of the following functions: copy, scan, print and fax. The
Notifying Party submits that the Parties do not supply single function fax
machines. Only HP supplies single function copiers. The only single function
device in which the Parties are both active is printers. The Parties both supply
MFPs with a printing function.
Notifying Party's view
(23) The Notifying Party submits that today any segmentation between SFP and MFP
printers would be without basis. The Notifying Party submits that between 2000
and 2016 SFPs have been gradually displaced by MFPs and that by 2016 the
prices of MFPs and SFPs have effectively converged. The Notifying Party argues
that one of the reasons for this convergence is that companies often use exactly
the same engine for their SFPs and MFPs. The Notifying Party submits that
according to the IDC11 market intelligence in the overall regular format printers
market the ratio went from 7% vs 93% (MFPs vs SFPs) in 2000 to 81% vs 19%
(MFPs vs SFPs) in 2016.
Commission's assessment
(24) Based on the results of the market investigation and the data provided by IDC, the
Commission notes that, indeed, there has been a trend in the market of SFPs being
displaced by MFPs and the distinction between these two types of printers
appears to be losing its importance.
(25) From a demand side perspective, nearly all customers who responded to market
investigation source both SFPs and MFPs, while a couple of customers source
only MFPs.12 Furthermore, nearly all distributors, resellers and retailers that
responded to market investigation currently distribute both SFPs and MFPs, while
only a few stated that they distribute only MFPs.13 Business customers and
distributors replying to market investigation confirmed that customers consider as
important that the printers have additional functionalities beside printing, such as
scanning.14 Some of the business customers indicated that some business
processes require additional functionalities where MFPs enable the reduction of
devices and leads to efficiencies.15 Furthermore, a few distributors, resellers and
retailers observed a decline in SFPs with more demand being driven to MFPs as
customers require greater functionality.16
(26) From a supply-side perspective, all competitors that responded to market
investigation provide both SFPs and MFPs.17
11 International Data Corporation is a provider of market intelligence for the information technology,
telecommunications and consumer technology markets. 12 Questionnaire Q2 to customers, question 13. 13 Questionnaire Q3 to distributors, resellers, retailers, question 16. 14 Questionnaire Q2 to customers, question 14; Questionnaire Q3 to distributors, resellers, retailers,
question 17. 15 Questionnaire Q2 to customers, question 14.1. 16 Questionnaire Q3 to distributors, resellers, retailers, question 17.1. 17 Questionnaire Q1 to competitors question 18.
6
(27) Based on the results of the market investigation, the Commission takes the view
that the distinction between SFPs and MFPs is increasingly blurred, due in
particular to the trend whereby SFPs are gradually replaced by MFPs.
(28) However, for the purpose of this decision, the exact product market definition can
be left open, since the Proposed Transaction does not raise serious doubts as to its
compatibility with the internal market under any plausible market definition.
4.1.3.2 Mono (black & white) vs. colour regular format printers
(29) In past decisions, the Commission found that a distinction could be made between
black and white and colour office automation equipment.18 In the most recent
decision, the Commission also noted that the market investigation indicated that
customer needs in the printing business are rapidly evolving and that there is an
increasing displacement of Mono devices by Colour devices.19 As all colour
devices have the capability to print in black and white, and costs of both types of
devices converge, the distinction between the two is becoming increasingly
blurred.20 The Commission however ultimately left the market definition open.
Notifying Party's view
(30) The Notifying Party submits that today any segmentation between Mono and
Colour printers would be without basis in view of the significant technology and
price convergence and the displacement of Mono by Colour printers. The
Notifying Party submits that the price gap between Mono and Colour devices has
reduced between 2000 and 2016 both in the overall regular format printers and in
the low speed segment. In addition, the Notifying Party submits that according to
IDC market intelligence colour printers represent 80% of sales of regular format
printers and in the slow speed segment their proportion increased to 96% by 2016.
Commission's assessment
(31) Based on the results of the market investigation and the data provided by IDC, the
Commission notes that indeed there has been a trend in the market of mono
printers being gradually replaced by colour printers, in particular in the slow
speed segments. As a result, the distinction between these two types of printers is
losing its importance.
(32) Furthermore, from the demand side perspective, all customers that responded to
market investigation currently source both colour and mono regular format
printers.21 All distributors, resellers and retailers that responded to the market
investigation currently distribute both colour and mono regular format printers,
with exception of one who supplies only colour printers.22 Almost half of the
respondents who provided meaningful response indicate that colour printers
represent between 80 – 100 % of their sales of regular format printers.23 For the
18 Commission decision in Case Konica/Minolta; Commission decision in Case M.5672 Canon/Océ. 19 Commission decision in Case M.5666 Xerox/ Affiliated computer services. 20 Commission decision in Case M.5666 Xerox/ Affiliated computer services. 21 Questionnaire Q2 to customers, question 15. 22 Questionnaire Q3 to distributors, resellers, retailers, question 18. 23 Questionnaire Q3 to distributors, resellers, retailers, question 18.2.
7
majority of business customers, colour printers represent an important percentage
of their printers purchase (in general 30 to 50% and in some cases over 70% of
their regular format printer purchases).24 The capability to use colour devices also
to print in black and white is reflected in a sourcing policy of a customer which
explains "New printer fleet with as low number of printers as possible is only
having color printers in offices to fulfill the print policy."25
(33) The Commission also notes that from a demand side perspective the cost-per-
page of mono and colour printers which used to be one of the major differences
between mono and colour printers a few years ago is effectively converging, in
particular in the slow printer segment as shown by Figure 1:
Figure 1 - Convergence of cost-per-page mono and colour
(34)
(35) From a supply-side perspective all competitors responding to the market
investigation explained that they supply both mono and colour regular format
printers.26 While the market investigation was mixed as to the question whether
from a supply side perspective manufacturers could easily switch production from
mono to colour printers, the Commission also notes that color printers are able to
and may be used by customers to print also black and white.27
(36) For the above reasons and for the purpose of this decision, the Commission
considers that the supply of mono (black and white) and of colour regular format
printers belong to the same relevant product market.
4.1.3.3 Speed ranges
(37) In previous decisions, the Commission considered a further distinction into
segments based on speed measured by the output of pages per minute (ppm)
namely personal devices (speed up to 10 or 20 ppm for mono and up to 20 ppm
for colour), office devices (speed between 11-20 and 90 ppm for mono and 20 –
24 Questionnaire Q2 to customers, question 15.2. 25 Questionnaire Q2 to customers, question 15.1. 26 Questionnaire Q1 to competitors, question 20. 27 Questionnaire Q1 to competitors, question 21 and 21.1.
8
50 ppm for colour) and commercial/production devices (speed over 90 ppm for
mono and above 50 for colour).28 In Canon/Océ the Commission noted that due to
demand and supply side substitutability the exact demarcation of the
segmentation should not be applied rigidly. Customers responding to the market
investigation in that case indicated that they could switch between different
segments in case of a price increase, while competitors responded that an
adjustment of the speed downwards would be possible, an increase however is
limited to 10ppm.29 In the most recent case the Commission noted that the market
investigation indicated that customer needs in the printing business are rapidly
evolving which makes narrow segmentation difficult and limits its usefulness for
a prospective analysis.30 The Commission ultimately left the product market
definition open.
Notifying Party's views
(38) The Notifying Party submits that any segmentation based on speed would not be
appropriate. The Notifying Party argues that suppliers offer various models of
regular format printers that compete over a continuum of printers speeds. The
Notifying Party claims that due to technological developments, speed has become
a less relevant distinguishing factor. Speed is only one of the many determinants
of printer prices. For a given printer speed, printer prices can vary depending on
other characteristics of a model. Furthermore, it argues that the average speed of
all regular format printers has increased in recent years.
(39) The Notifying Party further submits that there is no uniformly applicable industry
standard for segmenting the regular format printers market in terms of speed. The
Notifying Party argues that each manufacturer uses different criteria to segment
their products offerings, measure performance and identify gaps vis-à-vis
competitors's products. It also argues that due to technological development and
evolution of the products, ranges are constantly adjusted and recalibrated.
Commission's assessment
(40) Based on the market investigation, the Commission considers that the boundaries
of speed ranges of regular format printers are blurred.
(41) First, the market investigation confirmed that there is no uniform standard how
different speed ranges are grouped together and no clear lines between segments
based on speed. Competitors, customers, distributors, resellers and retailers have a
different view of what the speed ranges are for each (slow, medium, fast)
segment.31 IDC ranges represent just an indicative way for printer manufacturers
to classify their printers for statistical purposes.
28 Commission decision in Case M.3091 Konica/Minolta; Commission decision in case M.5672
Canon/Océ.
29 Commission decision in Case M.5672 Canon/Océ.
30 Commission decision in case M.5666 Xerox/ Affiliated computer services, paragraph 27.
31 Questionnaire Q2 – to customers, question 11; replies to Q1 – questionnaire to competitors, question
14; replies to Q3 – questionnaire to distributors, resellers, retailers, question 11.
9
(42) The majority of customers, distributors, resellers and retailers indicated that
printer speed is one criterion for a customer when selecting a printer, however,
not among the most important ones .32
(43) Some competitors argued that an adjustment of the printer speed upwards or
downwards would be possible.33 Moreover one competitor stated that it has
already implemented such adjustments:"[] did it since years, first from higher to
lower, then from lower to higher."34 Moreover, the majority of competitors and
distributors indicated that printers can be programmed (via a software action) to
print slower than originally designed.35
(44) However, for the purpose of this decision, the exact product market definition can
be left open, since the Proposed Transaction does not raise serious doubts as to its
compatibility with the internal market under any plausible market definition.
4.1.3.4 A3/A4 regular format printers
(45) The Commission also looked into the possible segmentation of printers by page
format (that is to say, A3 printers and A4 printers), a segmentation that it had not
analysed before.
The Notifying Party's views
(46) The Notifying Party argues that A3 and A4 printers are functionally
interchangeable, with exception for A4 printers of not printing on A3 pages. The
Notifying Party submits that A3 printers have certain features which traditionally
distinguished them from A4 printers such as security, stapling/finishing,
input/output tray capacity, duty cicle, service/intervention rates. However, the
Notifying Party argues that there is increasing convergence between A3 and A4
printers features, particularly in terms of security features, printer speed, paper
handling and finishing accessories and engine designs optimized for service based
models (high duty cycle, lower intervention rate).
(47) The Notifying Party argues that interchangeability of A3 and A4 printers is
particularly strong in the office environment. It argues that business customers
typically operate a fleet of A3 and A4 printers and adjust their printing production
by switching between the two formats. It also argues that in the context of an
increasing trend for efficient fleet management and device consolidation, A3 and
multiple A4 printers are viewed as substitutable. The Notifying Party also submits
that there is a constant increase of A3 printer sales and decline of A4 printers
which currently represent around 90% of all printers sold. It also argues that more
than 90% of all pages printed by A3 printers is in A4 format.
32 Questionnaire Q2 to customers, questions 12 and 19; Questionnaire Q3 to distributors, resellers,
retailers, question 12 and 23.
33 Questionnaire Q1 to competitors, questions 15 – 17.
34 Konica Minolta's answer to Questionnaire Q1 to competitors, question 15.1.
35 Questionnaire Q1 to Competitors, question 17, and to Questionnaire Q3 to distributors, resellers and
retailers, question 15.
10
Commission's assessment
(48) Based on the results of the market investigation, the Commission has indications
that A3 and A4 printers appear to be rather complementary than substitutes.
(49) From the demand-side perspective, nearly all customers who responded to market
investigation indicated that they consider A3 and A4 printers as complementary
products.36 Some customers who responded to the market investigation indicated
that both A3 and A4 are needed for different business needs. The majority of
distributors, resellers and retailers which responded to market investigation
indicated that their customers see A3 and A4 regular format printers as
complementary products. However, some indicated that A3 and A4 could be
considered as substitues as A3 regular format printers can print both formats.37
(50) From a supply side perspective, all the competitors who responded to market
investigation supply both A3 and A4 regular format printers.
(51) However, for the purpose of this decision, the exact product market definition can
be left open, since the Proposed Transaction does not raise serious doubts as to its
compatibility with the internal market under any plausible market definition.
4.2 Relevant geographic market
4.2.1 Branded Regular format printers.
(52) In previous decisions the Commission left the geographic market definition for
branded regular format printers open.38 In the most recent decision Xerox/
Affiliated computer services the market investigation indicated that the markets
for document production equipments is worldwide or at least EEA-wide scope.39
The Notifying Party's view
(53) The Notifying Party considers the relevant geographic market for regular format
printers is at least EEA wide in scope for the following reasons:
(54) First, the Parties and other major equipment manufacturers are multinational
corporations with manufacturing facilities in Asia and other countries from where
they ship their products around the world. Second, manufacturers of regular
format printers generally price on an EEA or even wider basis following standard
price lists. Product characteristics do not vary significantly in the EEA or
throughout the world. Third, there are no quota restraints or other material trade
barriers. HP's top 10 distributors in the EEA resell regular format printers in
36 Questionnaire Q2 to customers, question 7.
37 Questionnaire Q3 to distributors,resellers, retailers, question 7 and 7.1.
38 Commission decision of 22 December 2009 in Case M.5672 Canon/Océ, paragraphs 41 – 47;
Commission decision of 19 January 2010 in Case M.5666 Xerox/ Affiliated computer services,
paragraph 30 - 33.
39 Commission decision of 19 January 2010 in Case M.5666 Xerox/ Affiliated computer services,
paragraph 32.
11
multiple countries and some of them have one warehouse serving several
countries.
Commission's assessment
(55) Based on the market investigation, the Commission considers that there are strong
indications that the market for branded regular format printers is wider than
national or even EEA-wide.
(56) From a demand-side perspective, business customers stated they source on EEA
wide level with country specific conditions and specifications or at the national
level.40 However, several customers indicated that they already procure regular
format printers EEA wide with equal conditions across EEA.41 Business
customers also indicated that there are no differences in customer requirements in
the different countries within the EEA.42
(57) On the other hand, the replies of distributors, resellers and retailers received
during the market investigation were mixed. A large number of distributors,
resellers and retailers which responded to market investigation source regular
format printers on a national level.43 However, several indicated that they source
on EEA or worldwide level.44 In respect of their customers, while the majority of
respondents indicate that their customers source on country by country level,
some respondends indicate certain customers source on EEA level.45 The majority
of respondents which provided meaningful responses consider that there are no
differences in customer requirements for regular format printers in different
countries within the EEA.46
(58) From a supply-side perspective, all the competitors that responded to market
investigation indicated that they provide or are able to provide regular format
printers throughout the EEA and do not observe restrictions or barriers for supply
into any EEA country.47 They also indicated that there are no differences in
customer requirements in the different countries within the EEA.48
(59) In conclusion, in spite of the fact that current sourcing patterns are usually at
national level, there are clear indications that the relevant markets are wider than
national or even EEA wide.
(60) However, for the purpose of this decision, the exact geographic market definition
can be left open, since the Proposed Transaction does not raise serious doubts as
to its compatibility with the internal market under any plausible market definition.
40 Questionnaire Q2 to customers, question 17. 41 Questionnaire Q2 to customers, question 17. 42 Questionnaire Q2 to customers, question 18. 43 Questionnaire Q3 to distributors,resellers, retailers, question 20. 44 Questionnaire Q3 to distributors,resellers, retailers, question 20. 45 Questionnaire Q3 to distributors,resellers, retailers, question 21. 46 Questionnaire Q3 to distributors,resellers, retailers, question 22. 47 Questionnaire Q1 to competitors, questions 25 - 26.1. 48 Questionnaire Q1 to competitors, questions 24.
12
4.2.2 Unbranded regular format printers
The Notifying Party's view
(61) The Notifying Party submits that the market for unbranded regular format printers
is worldwide. Customers for unbranded OEM printers are large, multinational
printer manufacturers with global procurement practices which source these
products worldwide. In addition, suppliers of unbranded printers ship those
globally from a few locations worldwide.
Commission's assessment
(62) The Commission, based on the market investigation, considers that there are
indications that the market for unbranded regular format printers could be at least
EEA-wide. Indeed, during the market investigation suppliers confirmed that they
ship printers in all countries of the EEA.49
(63) However, for the purpose of this decision, the exact geographic market definition
can be left open, since the Proposed Transaction does not raise serious doubts as
to its compatibility with the internal market under any plausible market definition.
5 COMPETITIVE ASSESSMENT
(64) The activities of the Parties overlap horizontally on the market for the supply of
branded regular format printers. Furthermore, as the Parties supply unbranded
regular format printers to other manufacturers on an OEM basis and purchase
unbranded regular format printers, the Proposed Transaction gives rise to vertical
relationships between the downstream market for the supply of branded regular
format printers and the upstream market for the supply of unbranded regular
format printers.
5.1 Horizontal non-coordinated effects
5.1.1 Supply of branded regular format printers
(65) On the overall market for the supply of branded regular format printers, the
Proposed Transaction does not give rise to affected markets, either at worldwide
level or at EEA level. At worldwide level, the Parties' combined market share in
2016 would be [10-20]% (HP: [10-20]%; Samsung's Printer Business: [0-5]%).
At EEA level, the Parties' combined market share in 2016 would be [10-20]%
(HP: [10-20]%; Samsung's Printer Business: [0-5]%). The market share data
provided in this section is based on IDC data.
(66) Based on 2016 market shares50, on the overall market for branded regular format
printers, the Proposed Transaction gives rise to 14 national affected markets.
However, in most of these national markets, the merged entity's share would be
49 Questionnaire Q1 to competitors, question 25.
50 The Notifying Party was unable to provide separate data for the Baltic countries, Czech Republic,
Slovakia and UK and Ireland, as IDC reports do not report separately for these countries.
14
worldwide and EEA level. On the worldwide market, HP was only the fourth
largest supplier and Samsung Printer Business ranked as the 11th
largest supplier
in 2016, while in the EEA, HP ranked as the third largest supplier and Samsung
Printer Business as the 10th
largest supplier.
(68) Second, the Notifying Party notes that Samsung Printer Business is not a
significant competitive constraint to HP, as it is only one of the many competitors
in branded regular format printers and that moreover, its position in the EEA has
steadily declined both in terms of revenues and in terms of unit sales in the last
few years.
(69) Third, the Notifying Party argues that due to the characteristics of these products,
the way in which they are produced and sold, and the fact that many competitors
already have a number of printer models sold in the various segments, barriers to
entry and expansion in these markets are low. The Notifying Party also argues
that the investments required to expand into adjacent segments (for example
printers of different speeds) are limited and can be completed in a short time.
Further, it claimes that any supplier can viably enter or expand into any segment
of regular printers market by sourcing on OEM basis without incurring significant
initial costs or risks.
(70) Furthermore, should the merged entity raise prices, companies such as Ricoh,
Xerox or Konica Minolta would be well positioned to expand and reposition their
product offering in response to a post-merger price increase. Furthermore, most
regular format printer manufacturers are able and do offer a wide range of printer
models across all possible segments (SFPs, MFPs, mono, colour, and different
speed ranges).
(71) Fourth, the Notifying Party submits that due to low switching costs and strong
countervailing buyer power, customers at various levels of the distribution chain
can and do easily and timely switch to alternative sources of supply of branded
regular format printers. In terms of buyer power, the Notifying Party notes that
over […]% of the Parties' sales are made through large multinational distributors
and/or retailers that have significant buyer power, which they will exert in the
event of any increase by the merged entity. Companies such as […] and […], are
sophisticated buyers that exert substantial countervailing bargaining power and
can switch easily between competing products.
(72) Finally, in relation to the affected national markets, in particular Greece and the
Baltics where the merged entity's market share would be higher than 30% on the
overall regular format printers market, the Notifying Party submits that the
merged entity will continue to face competition from the same suppliers as at
EEA-level. Furthermore in the Baltics, Samsung's Printer Business share has
decreased [as a result of a strategic decision on market positioning].
5.1.1.2 Commission's assessment
(73) The Commission considers that the Proposed Transaction is unlikely to raise
doubts as to its compatibility with the internal market in the overall market for
branded regular format printers for the following reasons:
(74) According to Commission's Guidelines on the assessment of horizontal mergers
under the Council Regulation on the control of concentrations between
15
undertakings (the "Horizontal Guidelines")52 , combined market shares below
25% may indicate that the concentration is not likely to impede effective
competition. The Commission first notes that both at world-wide level, as well as
at EEA-level, the Proposed Transaction will not give rise to affected markets: the
merged entity's share at worldwide level was [10-20]% and at EEA-level [10-
20]% in 2016. Further, in 2016, on the overall worldwide market for branded
regular format printers there were many suppliers present, such as Xerox ([10-
20]%); Canon ([10-20]%); Ricoh ([10-20]%); Konica Minolta ([10-20]%),
Kyocera ([5-10]%), Epson ([0-5]%); Sharp ([0-5]%), Toshiba ([0-5]%), Brother
([0-5]%), Lexmark ([0-5]%), Oki ([0-5]%). The same suppliers were active in
2016 in the EEA: Xerox ([10-20]%); Canon ([10-20]%); Ricoh ([10-20]%);
Konica Minolta ([10-20]%), Kyocera ([5-10]%), Epson ([0-5]%); Sharp ([0-5]%),
Toshiba ([0-5]%), Brother ([0-5]%), Lexmark ([0-5]%), Oki ([0-5]%).
(75) Second, the majority of respondents to the market investigation do not consider
HP and Samsung's Printer Business as particularly close competitors. In
particular, business customers and distributors, resellers and retailers view other
suppliers such as Canon, Xerox, Brother and Epson closer to HP than Samsung's
Printer Business.53 In turn, only three of these respondents considered HP as the
closest competitor to Samsung's Printer Business and only for some of the
possible segments. Competitors' views on this issue were more mixed, but in
general, HP is perceived as a rather high-end, more expensive product supplier,
whose brand is widely recognised in the market, while Samsung's Printer
Business is perceived more as a mass-market, consumer brand.54 The fact that
Samsung's Printer Business products seem to address more consumers' segment,
rather than large business customers is demonstrated by the fact that a non-
negligible number of business customers indicating that they do not purchase
printers from Samsung's Printer Business or that they have not yet evaluated
Samsung's printers.55 Some customers pointed out that the product portfolios of
the two companies are complementary, as HP is specialised more in A4 printers
and Samsung in A3 printers and the two companies employ different technologies
(HP mainly inkjet and Samsung's Printer Business mainly laser)56. Market
investigation respondents did not consider that Samsung's printer portfolio, and in
particular its line of A3 printers is in any way superior in terms of functionality
and performance to those of other suppliers.57
(76) Third, the large majority of participants to the market investigation confirmed that
a sufficient number of competitors will continue to compete in the overall market
52 OJ 2004/C 31/03.
53 Questionnaire Q2 to business customers, question 26 and Questionnaire Q3 to distributors, retailers
and resellers, question 31.
54 Questionnaire Q1 to competitors, questions 28 and 32.
55 Questionnaire Q2 to business customers question 27.
56 Questionnaire Q3 to distributors, retailers and resellers, question 33.
57 Questionnaire Q1 to competitors, question 33, Questionnaire Q2 to business customers, question 30,
and Questionnaire Q3 to distributors, retailers and resellers, question 35.
16
for branded regular format printers both at worldwide level, as well as at EEA-
level.58 Furthermore, some respondents even signalled recent new entrants in the
EEA such as Pantum, a Chinese manufacturer and Kodak.59
(77) Fourth, the vast majority of market participants did not consider that the Proposed
Transaction will have a negative impact on the market for branded regular format
printers or on prices of branded regular format printers.60
(78) For these reasons, the Commission takes the view that the Proposed Transaction
does not raise serious doubts as regards its compatibility with the internal market
in relation to the supply of branded regular format printers worldwide and in the
EEA.
(79) Furthermore, in relation to the national affected markets identified in Table 1, the
Commission first notes that in most of these markets, the merged entity's market
share remains below 30%.
(80) Second, the Commission considers that the merged entity will continue to face
strong competition from the same competitors active at EEA level. Indeed,
suppliers such as Konica Minolta, Ricoh, Canon, Xerox, Kyocera, Brother,
Epson, Lexmark, Sharp are present in each EEA country.
(81) In the Baltics, the Commission first notes that Samsung's Printer Business is a
declining competitor, whose market share has indeed decreased from [10-20]% in
2013 to [5-10]% in 2016, while other competitors have expanded and increased
their market share: Kyocera has increased its market share from [10-20]% in 2013
to [10-20]% in 2016, Canon from [5-10]% in 2013 to [10-20]% in 2016, and
Konica Minolta from [10-20]% in 2013 to [10-20]% in 2016, which shows that
other suppliers indeed have the capacity and willingness to expand. Furthermore,
as explained in paragraph 58, competitors consider that they are able to supply in
all countries in the EEA. Second, the Commission considers that in the Baltics the
merged entity would continue to face strong competition from many competitors,
such as Kyocera ([10-20]%), Canon ([10-20]%), Konica Minolta ([10-20]%),
Lexmark ([0-5]%), Xerox ([0-5]%), Epson ([0-5]%) and Brother ([0-5]%) among
others.
(82) As regards Greece, while Samsung's Printer Business share has remained stable
over the last three years, the merged entity would continue to compete against a
large number of competitors, including Ricoh ([10-20]%), Konica Minolta ([10-
20]%), Xerox ([10-20]%), Epson ([5-10]%), Canon ([5-10]%), Kyocera ([5-
10]%) among others. Some of these competitors have considerably increased their
market share over the last few years, showing their ability and willingness to
expand in the market. These include Ricoh (which has increased its market share
58 Questionnaire Q2 to business customers, question 23; Questionnaire Q3 to distributors, retailers and
resellers, question 29.
59 Questionnaire Q1 to competitors, question 34; Questionnaire Q2 to business customers question 31
and Questionnaire Q3 to distributors, retailers and resellers, question 35.
60 Questionnaire Q1 to competitors, questions 41-42; Questionnaire Q2 to customers, questions 33-34;
Questionnaire Q3 to distributors, retailers and resellers, questions 38-39.
17
from [0-5]% in 2013 to [10-20]% in 2016), Kyocera (from [0-5]% in 2013 to [0-
5]% in 2016) and Epson (from [0-5]% in 2013 to [5-10]% in 2016). Furthermore,
as explained in paragraph 58, competitors consider that they are able to supply in
all countries in the EEA.
(83) Finally, participants to the market investigation did not raise any specific
concerns in relation to the impact of the Proposed Transaction on branded regular
format printers in these countries.61
(84) For all these reasons, the Commission takes the view that the Proposed
Transaction does not raise serious doubts as regards its compatibility with the
internal market in relation to overall branded regular format printers worldwide,
in the EEA and in each of the Baltics, Bulgaria, Croatia, Czech Republic,
Slovakia, Greece, Hungary, the Netherlands, Poland, Romania, Slovenia and
Spain.
5.1.2 Supply of branded regular format printers by narrower product segments
(85) Under possible narrower markets for the supply of branded regular format
printers, the Proposed Transaction gives rise to affected markets at worldwide,
EEA-wide level and national level.
5.1.3 SFPs and MFPs
5.1.3.1 Worldwide and EEA-wide markets
(86) At worldwide level, the Proposed Transaction would give rise to an affected
market in relation to certain potential segments of SFPs and MFPs as presented in
Table 2.
61 Questionnaire Q1 to competitors, questions 40-45; Questionnaire Q2 to customers, questions 32-34;
Questionnaire Q3 to distributors, retailers and resellers, questions 37-40.
19
5.1.3.2 The Notifying Party's views
(88) Specifically in relation to SFPs and MFPs, the Notifying Party first submits that
the Parties only overlap in colour SFPs and MFPs since Samsung's Printer
business does not offer slow speed mono printers.
(89) Second, the Notifying Party argues that the Samsung's Printer Business does not
exercise a significant competitive constraint on HP. In particular, in the low speed
segment SFPs and MFPs, Samsung's Printer Business is a small and declining
competitor, [as a result of a strategic decision on market positioning]. The
Target's share in colour, low-speed SFPs in the EEA has declined significantly
over the past few years (from [10-20]% in 2013 to [5-10]% in 2016). Its share has
also dropped as regards colour, low speed MFPs (from [5-10]% in 2013 to [0-5]%
in 2016). Similarly, in medium speed SFPs and MFPs, Samsung's Printer
Business position is de minimis and declining.
(90) Third, the Notifying Party argues that in all these hypothetical segments, the
merged entity will continue to face competition from a number of well-
established players, such as Canon, Epson and Brother, who have been growing
significantly. Canon and Epson for instance are the strongest competitors in the
EEA in the low and medium speed segments of SFPs and MFPs.
(91) Finally, the Notifying Party considers that printer suppliers can easily expand
from the higher speed segments into the lower speed segments, as IP and know-
how specific to those products are limited. The Notifying Party gives the example
of "copier" players such as Ricoh, Konica Minolta, Toshiba or Xerox which are
well-positioned to expand in the lower segments. Toshiba, Kyocera and Sharp
have already introduced products to compete in these segments in the last 2-3
years. Similarly, suppliers can easily expand geographically to serve
neighbouring countries, if they do not already have a presence in a specific
country.
5.1.3.3 Commission's assesment
(92) The Commission considers that the Proposed Transaction will not raise serious
doubts as regards its compatibility with the internal market in relation to these
segments worldwide and in the EEA for the following reasons:
(93) The Commission first observes that the SFPs segment is today limited, both at
world-wide level, as well as at EEA-level. According to the IDC market
intelligence in the overall regular format printers market, the ratio of MFPs versus
SFPs went from 7% vs 93% (MFPs v SFPs) in 2000 to 81% vs 19% (MFPs v
SFPs) in 2016, as illustrated in Figure 2. The Commission had already observed
this trend in previous decisions.63
63 See Commission Decision in case M 5672, Canon/Oce, of 22.12.2009, paragraph 17.
20
Figure 2 - SFPs dispacement by MFPs
(94) These figures support the assertions of the Notifying Party concerning the trend of
SFPs being gradually displaced by MFPs. As indicated in paragraphs (23) and
following, participants to the market investigation confirmed this displacement of
SFPs. For instance, distributors confirmed that MFPs represent today 80 to 85%
of the sales of printers and that customers (including end consumers) require more
functionalities than just printing in the device they choose to purchase.64
Therefore, the SFPs segment appears to be shrinking and losing in importance,
not only for business customers, but also with consumers.
(95) Second, the Commision notes that only the slow and medium speed segments of
SFPs and MFPs are horizontally affected. The Parties' presence in fast SFPs and
MFPs is limited.
(96) Third, the Commission observes that irrespective of the possible speed
segmentation within SFPs and MFPs, the merged entity's market share would
remain under 50%, and that other strong suppliers such as Canon, Epson, Brother,
Kyocera, Lexmark or Xerox will continue to exercise competitive pressure on the
merged entity in all these potential segments.
(97) Fourth, the majority of respondents to the market investigation did not indicate
HP and Samsung’s Printer Business as particularly close competitors neither in
SFPs, nor in MFPs.65
(98) Fifth, the vast majority of market participants did not consider that the Proposed
Transaction will have any impact on the market for the supply of branded regular
64 Questionnaire Q3 to distributors, resellers and retailers, Questions 16-17.
65 Questionnaire Q2 to business customers, question 26 and Questionnaire Q3 to distributors, retailers
and resellers, question 31.
22
50]% 50]% 30]% 20]% 10]%
France [30-
40]%
[0-5]% [30-
40]%
Canon [30-
40]%
Epson [20-
30]%
Brother [0-
5]%
Germany [40-
50]%
[5-10]% [40-
50]%
Canon [20-
30]%
Epson [10-
20]%
Brother [10-
20]%
Greece [40-
50]%
[0-5]% [40-
50]%
Epson [40-
50]%
Canon [0-
5]%
Xerox [0-
5]%
Hungary [40-
50]%
[0-5]% [40-
50]%
Epson [30-
40]%
Canon [20-
30]%
Xerox [0-
5]%
Italy [30-
40]%
[10-20]% [40-
50]%
Epson [20-
30]%
Canon [10-
20]%
Brother [10-
20]%
The
Netherlands
[20-
30]%
[10-20]% [30-
40]%
Canon [20-
30]%
Epson [20-
30]%
Brother [5-
10]%
Norway [30-
40]%
[10-20]% [50-
60]%
Epson [30-
40]%
Canon [5-
10]%
Brother [5-
10]%
Poland [50-
60]%
[0-5]% [50-
60]%
Canon [20-
30]%
Epson [10-
20]%
Ricoh [0-
5]%
Portugal [30-
40]%
[0-5]% [30-
40]%
Epson [30-
40]%
Canon [10-
20]%
Brother [0-
5]%
Romania [40-
50]%
[0-5]% [40-
50]%
Epson [20-
30]%
Canon [20-
30]%
Xerox [0-
5]%
Slovenia [60-
70]%
[0-5]% [60-
70]%
Canon [10-
20]%
Epson [10-
20]%
Xerox [0-
5]%
Spain [60-
70]%
[5-10]% [60-
70]%
Epson [10-
20]%
Canon [5-
10]%
Brother [5-
10]%
Sweden [20-
30]%
[10-20]% [30-
40]%
Canon [40-
50]%
Epson [10-
20]%
Brother [0-
5]%
UK and
Ireland
[20-
30]%
[5-10]% [20-
30]%
Epson [30-
40]%
Canon [20-
30]%
Brother [5-
10]%
Source: IDC data, 2016
(102) However, the Commission considers that the Proposed Transaction will not raise
serious doubts as regards its compatibility with the internal market in any of these
countries/regions for the following reasons:
(103) First, the merged entity's market share in the majority of these countries (Austria,
Belgium, Bulgaria, Croatia, Czech Republic, Slovakia, Denmark, Finland, France,
Germany, Greece, Hungary, Italy, The Netherlands, Portugal, Romania, Sweden,
UK and Ireland) remains under 50% and several strong competitors (among
which Ricoh, Epson, Brother and Xerox) will continue to constrain the merged
entity post-Proposed Transaction. Furthermore, in most of these countries
23
Samsung's Printer Business is a small competitor, ranking behind the top three
suppliers. Finally, none of the respondents to the market investigation raised
concerns in relation to these national markets.67
(104) Second, in the Baltics68 where the market share of the merged entity is the highest
for this segment (slightly over [70-80]%), the Commission first notes that
Samsung's Printer Business is indeed a declining competitor in this possible
segment, as it has lost significant market share over the last few years (from
almost [20-30]% in 2013 to [10-20]% in 2016). Second, the Commission
considers that the merged entity will continue to face three strong competitors
(Epson, Canon and Brother) which will be able to react promptly in case of a
price increase by the merged entity. For example, the evolution of the market
shares of Canon and Brother in the Baltic region in this possible segment shows
that these competitors would be able and willing to expand, as they have both
almost doubled their share between 2013 and 2016. Furthermore, in the other
speed segments of SFPs and MFPs there are eleven other global competitors
present in the Baltics which could potentially expand or enter the slow speed
segment as many of them have a complete portfolio of printers.69 Similarly in
Spain where the market share of the merged entity would be [60-70]%, the
Commission first notes that Samsung's Printer Business is a declining competitor
(from [5-10]% share in 2013 to [5-10]% in 2016) in this possible segment.
Second, the Commission considers that apart from the top three competitors
(Epson, Canon and Brother) there are a few other competitors active in this
segment (Ricoh, Dell and Xerox) which will continue to constrain the merged
entity post-Transaction. In particular, Epson has significantly expanded over the
last few years, its market share increasing from [5-10]% in 2013 to [10-15]% in
2016. Furthermore, the increment brought by the Proposed Transaction in Spain
would be only [5-10]%, as Samsung's Printer Business is one of the smaller
competitors behind Epson, Canon and Brother. The same considerations on
expanding or entering in the slow speed segment apply in relation to competitors
active in the medium speed segment of SFPs. Also, in Slovenia, where the market
share of the merged entity would be [60-70]%, the Commission first notes that
Samsung's Printer Business is a declining competitor (from [5-10]% market share
in 2013 to [0-5]% in 2016) in this segment. Second, the Commission considers
that there are four competitors (Epson, Canon, Xerox and Brother) which will
continue to constrain the merged entity post-Transaction. In particular, not only
Epson has significantly expanded in this possible segment over the last few years,
its market share increasing from [0-5]% in 2013 to [10-20]% in 2016, but also
Canon, which has increased its market share from [10-20]% in 2013 to [10-20]%
in 2016. Furthermore, the increment brought by the Proposed Transaction in
67 Questionnaire Q1 to competitors, questions 40-45; Questionnaire Q2 to customers, questions 32-34;
Questionnaire Q3 to distributors, retailers and resellers, questions 37-40.
68 In the Baltics, based on the turnover figures of Samsung's Printer Business for 2015, the Commission
notes that the turnover is in fact realised in one country, Latvia. Therefore Lithuania and Estonia may
not be in fact affected national markets.
69 Further, as explained in paragraphs 42, it is possible to program a printer to be slower than originally
designed.
25
Denmark [30-
40]%
[0-5]% [30-
40]%
Lexmark
[10-20]%
Brother [10-
20]%
Oki [10-
20]%
Finland [30-
40]%
[5-10]% [30-
40]%
Canon [10-
20]%
Toshiba [10-
20]%
Kyocera [10-
20]%
France [20-
30]%
[5-10]% [30-
40]%
Brother [10-
20]%
Lexmark
[10-20]%
Konica
Minolta [5-
10]%
Germany [20-
30]%
[5-10]% [20-
30]%
Kyocera [30-
40]%
Brother [10-
20]%
Lexmark [5-
10]%
Greece [20-
30]%
[20-30]% [50-
60]%
Lexmark
[10-20]%
Oki [10-
20]%
Brother [5-
10]%
Hungary [20-
30]%
[10-20]% [30-
40]%
Kyocera [20-
30]%
Epson [10-
20]%
Oki [10-
20]%
Italy [10-
20]%
[10-20]% [30-
40]%
Lexmark
[20-30]%
Kyocera [10-
20]%
Oki [5-10]%
The
Netherlands
[30-
40]%
[5-10]% [30-
40]%
Brother [10-
20]%
Lexmark [5-
10]%
Kyocera [5-
10]%
Norway [30-
40]%
[0-5]% [40-
50]%
Oki [20-
30]%
Brother [20-
30]%
Ricoh [0-
5]%
Poland [20-
30]%
[0-5]% [30-
40]%
Kyocera [10-
20]%
Lexmark
[10-20]%
Oki [10-
20]%
Portugal [20-
30]%
[5-10]% [20-
30]%
Oki [10-
20]%
Kyocera [10-
20]%
Konica
Minolta [10-
20]%
Romania [30-
40]%
[5-10]% [30-
40]%
Lexmark
[10-20]%
Kyocera [10-
20]%
Xerox [10-
20]%
Slovenia [20-
30]%
[0-5]% [30-
40]%
Lexmark
[20-30]%
Kyocera [10-
20]%
Xerox [5-
10]%
Spain [30-
40]%
[5-10]% [30-
40]%
Brother [10-
20]%
Kyocera [10-
20]%
Ricoh [10-
20]%
Sweden [30-
40]%
[10-20]% [40-
50]%
Oki [10-
20]%
Ricoh [10-
20]%
Lexmark [5-
10]%
UK and
Ireland
[20-
30]%
[5-10]% [30-
40]%
Brother [10-
20]%
Konica
Minolta [5-
10]%
Kyocera [5-
10]%
Source: IDC data 2016
(108) However, the Commission considers that the Proposed Transaction will not raise
serious doubts as regards its compatibility with the internal market in any of these
countries for the following reasons:
27
Denmark [60-
70]%
[0-5]% [60-
70]%
Canon [20-
30]%
Brother [10-
20]%
Epson [5-
10]%
Finland [30-
40]%
[10-20]% [40-
50]%
Canon [20-
30]%
Epson [10-
20]%
Brother [10-
20]%
France [40-
50]%
[0-5]% [40-
50]%
Canon [30-
40]%
Epson [20-
30]%
Brother [0-
5]%
Germany [40-
50]%
[5-10]% [40-
50]%
Canon [30-
40]%
Epson [10-
20]%
Brother [5-
10]%
Greece [60-
70]%
[0-5]% [60-
70]%
Epson [10-
20]%
Canon [10-
20]%
Konica
Minolta [0-
5]%
Hungary [40-
50]%
[0-5]% [40-
50]%
Canon [20-
30]%
Epson [10-
20]%
Bother [0-
5]%
Italy [30-
40]%
[0-5]% [40-
50]%
Epson [20-
30]%
Canon [20-
30]%
Brother [0-
5]%
The
Netherlan
ds
[30-
40]%
[0-5]% [30-
40]%
Canon [40-
50]%
Epson [10-
20]%
Brother [5-
10]%
Norway [30-
40]%
[0-5]% [30-
40]%
Epson [30-
40]%
Brother [20-
30]%
Canon [5-
10]%
Poland [40-
50]%
[0-5]% [40-
50]%
Brother [20-
30]%
Canon [20-
30]%
Epson [10-
20]%
Portugal [50-
60]%
[0-5]% [50-
60]%
Canon [20-
30]%
Epson [10-
20]%
Brother [5-
10]%
Romania [20-
30]%
>[0-5]% >[30-
40]%
Canon [40-
50]%
Epson [20-
30]%
Brother [5-
10]%
Slovenia [40-
50]%
[0-5]% [40-
50]%
Canon [20-
30]%
Brother [10-
20]%
Epson [5-
10]%
Spain [50-
60]%
[0-5]% [50-
60]%
Epson [10-
20]%
Canon [10-
20]%
Brother [10-
20]%
Sweden [30-
40]%
[5-10]% [40-
50]%
Canon [40-
50]%
Brother [5-
10]%
Epson [5-
10]%
UK and
Ireland
[40-
50]%
>[0-5]% >[50-
60]%
Canon [30-
40]%
Epson [10-
20]%
Brother [0-
5]%
Source: IDC data, 2016
28
(112) However, the Commission considers that the Proposed Transaction will not raise
serious doubts as regards its compatibility with the internal market in any of these
countries for the following reasons:
(113) First, the merged entity's market share in the majority of these countries (Austria,
Baltics, Bulgaria, Croatia, Czech Republic, Slovakia, Denmark, Finland, France,
Germany, Hungary, Italy, The Netherlands, Norway, Poland, Romania, Slovenia,
Sweden, UK and Ireland) remains under 50% and several strong competitors
(among which Canon, Epson, Brother and Konica Minolta) will continue to
constrain the merged entity post-Transaction. Furthermore, in most of these
countries, Samsung's Printer Business is a small competitor, ranking behind the
top three suppliers.
(114) Second, in Belgium, Greece, and Denmark where the market share of the
merged entity is the highest for this segment (over 60%) the merged entity will
continue to face three strong competitors (Epson, Canon, Brother or Konica
Minolta) which will continue to constrain the merged entity. Additionally, some
other suppliers are active in this segment in Belgium (Dell and Ricoh), Denmark
(Xerox) and Greece (Ricoh, Kyocera and Xerox). Furthermore, the increment
brought by the Proposed Transaction in those countries is very limited ([0-5]% or
less).
(115) Third, in Spain and Portugal, where the merged entity's market share would be
[50-60]% and [50-60]% respectively, the Commission considers that the merged
entity will continue to face competition from Epson, Canon and Brother, but also
from Dell and Ricoh in Spain and Xerox, Konica Minolta and Kyocera in
Portugal (which are also present in this segment). Furthermore, the increment
brought by the Proposed Transaction in Spain and Portugal is very limited.
(116) Finally, none of the respondents to the market investigation raised concerns in
relation to these national markets.73
(d) Medium speed MFPs
(117) In the potential medium speed segment of MFPs, the Proposed Transaction gives
rise to 8 affected national markets in the EEA as shown in Table 7.
73 Questionnaire Q1 to competitors, questions 40-45; Questionnaire Q2 to customers, questions 32-34;
Questionnaire Q3 to distributors, retailers and resellers, questions 37-40.
31
Transaction. Distributors and resellers multi-source and often stock 3 – 4 printer
brands. Therefore, HP expects that the distributors and resellers that are currently
stocking both HP and Samsung printers, will likely [business decision]. In
addition, HP will not [transaction specific decision] and expects HP will not get
access to or be able to retail all commercial relationsips of this sales force with its
printer customers.
(126) The Notifying Party submits that in the potential A4 segment the merged entity
will continue to face strong competition from at least seven well-established
competitors with shares in the EEA between around [5-10]% and [10-20]%
(Canon, Epson , Kyocera, Brother, Ricoh, Konica Minolta and Lexmark), the
majority of which which have been increasing their EEA shares between 2013
and 2016. In the same period both HP and Samsung's Printer Business shares of
sales declined on worldwide and EEA level.
(127) The Notifying Party further argues that barriers to entry and expansion into A4
printer segment are low. The ease of entry and expansion is demonstrated by the
traditional copier manufacturers recent expansion into the A4 printer segment. As
all major players are already active in both the A3 and A4 printer segments any
price increase of A4 printers post-Transaction would increase the incentives of
competitors to further expand in this segment and would result unprofitable.
(128) The Notifying Party also argues that the switching costs are low and the
customers exert substantial countervailing bargaining power.
Commission's assesment
(129) The Commission first notes that both at world-wide level, as well as at EEA-
level, the merged entity's share remains below 40% and several strong
competitors (such as Canon, Epson, Brother, Lexmark, Ricoh, or Kyocera) will
continue to constrain the merged entity post-Transaction. Furthermore Samsung
Printer Business is a small competitor, ranking behind the top suppliers as 8th
supplier worldwide and 9th supplier in the EEA.
(130) Second, the majority of respondents to the market investigation do not consider
HP and Samsung's Printer Business as particularly close competitors. In
particular, business customers and distributors, resellers and retailers view other
suppliers such as Canon, Xerox, Brother, Epson and Lexmark closer to HP than
Samsung's Printer Business.75
(131) Third, the large majority of participants to the market investigation confirmed that
a sufficient number of suppliers of A4 format printers will continue to compete
both at worldwide level, as well as at EEA-level.76
(132) Fourth, none of the respondents to the market investigation raised concerns in
relation to this potential segment.77
75 Questionnaire Q2 to business customers, question 26 and Questionnaire Q3 to distributors, retailers
and resellers, question 31.
76 Questionnaire Q2 to business customers, question 23; Questionnaire Q3 to distributors, retailers and
resellers, question 29.
33
Germany [20-
30]%
[5-10]% [30-
40]%
Kyocera [10-
20]%
Canon [10-
20]%
Brother [10-
20]%
Greece [40-
50]%
[10-
20]%
[60-
70]%
Epson [10-
20]%
Lexmark [5-
10]%
Canon [5-
10]%
Hungary [20-
30]%
[10-
20]%
[40-
50]%
Epson [10-
20]%
Canon [10-
20]%
Kyocera
[10-20]%
Italy [20-
30]%
[10-
20]%
[30-
40]%
Epson[10-
20]%
Canon [10-
20]%
Brother [5-
10]%
The
Netherlands
[30-
40]%
[0-5]% [30-
40]%
Canon [20-
30]%
Epson [5-
10]%
Brother [5-
10]%
Norway [20-
30]%
[0-5]% [30-
40]%
Epson [10-
20]%
Canon [10-
20]%
Brother [10-
20]%
Poland [30-
40]%
[0-5]% [30-
40]%
Brother [10-
20]%
Canon [10-
20]%
Lexmark [5-
10]%
Portugal [20-
30]%
[0-5]% [20-
30]%
Canon [20-
30]%
Konica
Minolta [5-
10]%
Epson [5-
10]%
Romania [30-
40]%
[5-10]% [40-
50]%
Canon [10-
20]%
Xerox [5-
10]%
Epson [5-
10]%
Slovenia [40-
50]%
[0-5]% [40-
50]%
Canon [10-
20]%
Kyocera [10-
20]%
Lexmark [5-
10]%
Spain [30-
40]%
[0-5]% [30-
40]%
Kyocera [10-
20]%
Ricoh [10-
20]%
Brother [10-
20]%
Sweden [20-
30]%
[5-10]% [30-
40]%
Canon [20-
30]%
Ricoh [10-
20]%
Brother [5-
10]%
UK and
Ireland
[30-
40]%
[0-5]% [30-
40]%
Canon [10-
20]%
Epson [10-
20]%
Ricoh [5-
10]%
(135) The Commission considers that for the reasons set out below, the Proposed
Transaction does not raise serious doubts as regards its compatibility with the
internal market in relation to A4 regular format printers at the national level:
(136) First, in all countries considered, the combined market share of the Parties would
remain below 50% and several strong competitors would remain in each of these
countries post-Transaction, which will exert competitive pressure on the merged
entity (including, depending on the country, Brother, Canon, Epson, Kyocera,
Lexmark, Ricoh, Xerox and other players). Further, in most countries (Austria,
Bulgaria, Czech Republic / Slovakia, Finland, France, Germany, Hungary, Italy,
the Netherlands, Norway, Poland, Spain Sweden, and the UK / Ireland) the
combined market shares of the Parties would remain below 40% and in Austria,
France and Portugal below 30%.
34
(137) The only country where the combined market share of the Parties would exceed
50% is Greece. However, even in Greece, several competitors will remain post-
Transcation which will continue to constrain the Parties, including Epson ([10-
20]%), Oki ([0-5]%) and Lexmark ([5-10]%). Other players on this potential
market include Canon ([0-5]%), Ricoh ([0-5]%), Xerox ([0-5]%), Konica Minolta
([0-5]%), Kyocera ([0-5]%) and Brother ([0-5]%).
5.1.4.3 Conclusion on the potential segment of A4 regular format printers
(138) For all these reasons, the Commission considers that the Proposed Transaction
does not raise serious doubts as regards its compatibility with the internal market
in relation to A4 regular format printers world-wide, in the EEA and at national
level.
5.2 Vertical effects
(139) The Proposed Transaction would give rise to several vertical relationships. In
particular, the Parties are both active upstream as suppliers of unbranded (OEM)
regular format printers and as suppliers of branded regular format printers.
(140) According to the Non-Horizontal Merger Guidelines, foreclosure occurs when
actual or potential rivals’ access to supplies or markets is hampered, thereby
reducing those companies’ ability and/or incentive to compete. Such foreclosure
may discourage entry or expansion of rivals or encourage their exit.78
(141) The Non-Horizontal Merger Guidelines distinguish between two forms of
foreclosure: input foreclosure occurs where the merger is likely to raise the costs
of downstream rivals by restricting their access to an important input and
customer foreclosure occurs where the merger is likely to foreclose upstream
rivals by restricting their access to a sufficient customer base.79
(142) In order for foreclosure to be a concern, three conditions need to be met post-
merger: (i) the merged entity needs to have the ability to foreclose its rivals80; (ii)
the merged entity needs to have the incentive to foreclose its rivals81; and (iii) the
foreclosure strategy needs to have a significant detrimental effect on the
parameters of competition on the downstream market (input foreclosure)82 or on
consumers (customer foreclosure). In practice, these factors are often examined
together since they are closely intertwined.83
78 Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control
of concentration between undertakings (the Non-Horizontal Merger Guidelines) OJ C 265/6,
18.10.2008, paragraphs 29-30.
79 See Non-Horizontal Merger Guidelines, paragraph 30.
80 See Non-Horizontal Merger Guidelines, paragraphs 33 to 39 and 60 to 67.
81 See Non-Horizontal Merger Guidelines, paragraphs 40 to 46 and 68 to 71.
82 See Non-Horizontal Merger Guidelines, paragraphs 47 to 57.
83 See Non-Horizontal Merger Guidelines, paragraphs 72 to 77.
35
(143) The Commission examined whether the Proposed Transaction could give rise to a
possible risk of input foresclosure for the unbranded (OEM) regular format
printers supplied by the Parties to the detriment of the Parties' competitors active
downstream as suppliers of branded regular format printers. In addition, the
Commission assessed the risk of a possible customer foreclosure for the Parties'
competitors which are active as suppliers of unbranded (OEM) regular format
printers which currently supply HP.
(144) The Commission's analysis focuses on the risk of foreclosure in relation to laser
printers but does not cover inkjet printers. While HP supplies unbranded inkjet
printers on an OEM basis to [customer] and to [customer], based on the Notifying
Party's submission these sales are not EEA sales.8485
5.2.1 Input foreclosure
5.2.1.1 Notifying Party's views
(145) The Notifying Party submits that the Proposed Transaction would not give the
merged entity the ability and incentive to engage in input foreclosure.
(146) First, the Notifying Party submits that the merged entity would not have the
ability to foreclose the downstream customers of Samsung's Printer Business
given that: (1) customers would be protected against any degradation in quality or
interruption of supply through their contractual agreements with Samsung's
Printer Business; (2) Samsung's Printer Business would lack market power in the
upstream market for the supply of unbranded (OEM) laser printers; (3) customers
could deploy counterstrategies in case the merged entity would adopt a
foreclosure strategy, namely (i) turn to other suppliers of unbranded (OEM)
regular format printers (including Canon and Sharp) or (ii) increase their internal
production to the extent they are vertically integrated; and, (4) the absence of
capacity constraints in the industry.
(147) Second, according to the Notifying Party, the merged entity would have no
incentive to engage in any hypothetical input foreclosure strategy since: (1)
contract manufacturing for unbranded (OEM) printers is typical in this industry,
without evidence of such foreclosure attempts; and, (2) the merged entity would
have an incentive post-Transaction to maintain large scale production and
capacity utilization to maximize cost efficiency.
5.2.1.2 Commission's assessment
(148) Based on the Notifying Party's submission, Samsung's Printer Business supplies
A4 laser printers86 on an OEM basis to [customers].87 However, the Notifying
84 In particular, the territorial scope of the agreement between HP and [supplier] is limited to [country]
and [supplier] does not sell A4 inkjet printers outside of [country].
85 The Notifying Party notes that the Proposed Transaction may also give rise to a vertical relationship in
respect of consumables as Samsung's Printer Business provides laser toners, drums, and printer
cartridges to […].
86 In the EEA, Samsung's Printer Business only supplies A4 unbranded laser printers, but not A3.
36
Party notes that Dell is gradually withdrawing from the regular format printer
market.88 In addition, Samsung's Printer Business has supplied a small amount
([…] units) of A3 laser printers to [customer] in [country] and [country], and will
supply further A3 laser printers on an OEM basis to [customer] pursuant to an
agreement entered into in 2016.89
(149) During the market investigation, Konica Minolta stated that it had purchased a
very small amount (less than [0-5]% of annual turnover) from each of the Parties
in 2016.90
(150) The Commission considers that for the reasons set out below, the Proposed
Transaction does not raise serious doubts as to its compatibility with the internal
market with respect to potential foreclosure of Samsung's Printer Business'
(OEM) supplies of regular format printers, regardless of any segmentation.
(151) First, with regard to the ability to engage in input foreclosure, the merged entity
does not appear to have a significant degree of market power in the upstream
market for the supply of unbranded (OEM) printers.
(152) Samsung's Printer Business' market shares for unbranded (OEM) Regular Format
(Laser) Printers (overall for A3 and A4, A3 and A4 separately) are summarized in
the Tables 11 to 15 below. As these tables show, Samsung's Printer Business did
not sell any A3 format unbranded (OEM) laser printers worldwide to any
significant degree. In fact Samsung's Printer Business did not sell any A3 format
unbranded (OEM) laser printers in the EEA. Looking only at a hypothetical A4
format unbranded (OEM) printer segment, Samsung's Printer Business’ shares by
value worldwide were [0-5]% in 2016, while in the EEA they were [0-5]%.
87 While the Notifying Party submits that Samsung's Printer Business supplies unbranded regular format
printers on an OEM basis also to […] (Form CO, para. 370), IDC sales figures submitted by the
Notifying Party for the period 2013-2016 do not show any sales to […]. IDC figures also show a very
small amount of OEM sales of the Samsung's Printer Business […].
88 The official Dell statement is available: http://www.considerit.co.uk/wp-content/uploads/Update-on-
Dells-Imaging-business-letter-EN.pdf
89 The Notifying Party also notes that in [country] and [country], HP works together with [partner] to
provide [product], which is a turn-key solution that bundles [partner] branded printers (supplied as
unbranded (OEM) printers from HP) together with software and PC hardware to enable [partner’s]
customers to operate a [business].
90 See replies to Q1 – questionnaire to competitors, questions 36 and 36.1.
42
KYOCERA
DOCUMENT
SOLUTIONS
GROUP –
[…] [0-5]% […] [0-5]%
KONICA
MINOLTA GROUP
– Unbranded
[…] [0-5]% […] [0-5]%
OKI – Unbranded […] [0-5]% […] [0-5]%
OTHERS –
Unbranded […] [0-5]% […] [0-5]%
TOTAL […] 100% […] 100%
Source: Form CO, based on IDC reports
(157) In a hypothetical segment of A4 format unbranded (OEM) laser printers on EEA-
wide basis, Samsung's Printer Business’ shares by value were [0-5]% in 2016.
Other competitors are Canon Group ([80-90]%), Lexmark ([10-20]%), Kyocera
Document Solutions Group ([0-5]%), and others.
(158) Second, as discussed above, there appear to many competitors to the Samsung's
Printer Business which could provide alternatives to the merged entity. Canon in
particular has a large value share in all segments. Given that, based on the
Notifying Party's submission, [post-Transaction supply strategy of the merged
entity regarding unbranded (OEM) regular format printers].
(159) Third, based on the Notifying Party's submission, Xerox and Toshiba (as well as
other players including Canon, Ricoh, and Konica Minolta) would be vertically
integrated and therefore could expand their respective internal production as an
effective counter-strategy. During the market investigation, Xerox indicated that
it sourced regular format printers unbranded on an OEM basis from Fuji Xerox. 91
(160) Fourth, some of Samsung's Printer Business' customers for unbranded (OEM)
regular format printers already source from other manufacturers. Based on the
Notifying Party's submission, […] already sources unbranded (OEM) printers
from Brother, Fuji-Xerox, Toshiba and Lexmark in addition to Samsung's Printer
Business, while […] also sources unbranded (OEM) printers from Fuji-Xerox and
Lexmark. Thus, even those customers which are not vertically integrated appear
to have alternative sources of supply.
(161) Fifth, with regard to the incentive to engage in any input foreclosure, during the
market investigation it appeared that contract manufacturing for unbranded
(OEM) printers is well established. Around half of the competitors who replied to
the market investigation, indicated that they currently fully or partially source on
an OEM basis from another manufacturer, including for A3 laser printers (Oki,
Konica Minolta and Xerox) and A4 laser printers (Konica Minolta and Xerox).
91 Questionnaire Q1 to competitors, question 37.
43
Oki, for example, has indicated that it purchases A3 multifunction devices from
Toshiba.
(162) One competitor which responded to the market investigation stated that post-
Transaction the merged entity would not have an incentive to stop supplying
unbranded regular format printers to other regular format printer manufacturers,
while most competitors did not express a view on this question. 92
(163) Finally, with regard to the likely impact on prices and choice, during the market
investigation, no competitor which responded to the market investigation stated
that the Proposed Transaction would have an impact on the supply or the price of
unbranded regular format printers in the EEA, while some competitors stated that
the Proposed Transaction would have no impact and most competitors did not
express any view.93 In addition, competitors did not raise any concerns with
regard to input foreclosure during the market investigation.
5.2.2 Customer foreclosure
5.2.2.1 Notifying Party's views
(164) The Notifying Party submits that the Proposed Transaction would not give the
merged entity the ability or incentive to engage in customer foreclosure strategies
for the following reasons: (1) HP constitutes less than […] of the demand for
unbranded (OEM) printers and therefore [supplier], HP's main supplier and a
competitor of Samsung's Printer Business for the supply of unbranded (OEM)
printers, would still have access to over […] of the unbranded (OEM) printer
demand; (2) HP would have no intention of [post-Transaction strategic decision]
but would hope to continue its supply relationship unbranded (OEM) A4 laser
printers with [supplier]; (3) [information on Parties’ capacity] would prevent HP
from [post-Transaction strategic decision] while continuing the current OEM
business94; (4) since Canon, Toshiba and Sharp are all vertically integrated
manufacturers of branded printers as well as unbranded (OEM) printers, they
could brand the printers with their own mark and sell them directly into the
market through their own sales channels.
5.2.2.2 The Commission's assessment
(165) HP purchases unbranded regular format printers on an OEM basis from
[suppliers].95 HP has also recently concluded a new manufacturing arrangement
with [supplier] by which it will purchase future volumes of unbranded (OEM)
regular format laser printers.
92 Questionnaire Q1to competitors, question 37. 93 Questionnaire Q1 to competitors, questions 43 and 44. 94 According to the Notifying Party, if HP were to [post-Transaction strategic decision] capacity of
Samsung's Printer Business' unbranded (OEM) printer supplies, capacity issues could force it to reduce
supply to [customer], [customer], [customer], and/or [customer], which would likewise open up
additional opportunities for suppliers of unbranded (OEM) printers to pursue.
95 Based on the Notifying Party's submission, HP purchases […] million units of unbranded (OEM) laser
printers from […], approximately […] from Samsung's Printer Business and […] units from […].
44
(166) The Commission considers that for the reasons set out below, the Proposed
Transaction does not raise serious doubts as to its compatibility with the internal
market with respect to potential foreclosure of […] (OEM) supplies of regular
format printers, regardless of any possible segmentation.
(167) First, with regard to the ability to engage in a hypothetical customer foreclosure
strategy, HP purchases approximately […] million units of unbranded (OEM)
printers, which corresponds to [30-40]% of the volume of unbranded (OEM)
printers ([…] million units) sold worldwide. Based on the Notifying Party's
submission, while HP expects[post-Transaction strategic decision], HP does not
appear to be able to.96 [information on the Parties’ capacity and post-Transaction
strategic decision], HP would still need to [information on the Parties’ supply]
unbranded (OEM) printers.
(168) Second, on the incentive to engage in customer foreclosure, most competitors
which responded to the market investigation, […], did not express a view on
whether post-Transaction the merged entity would have an incentive to stop
sourcing unbranded regular format printers from other regular format printer
manufacturers.97 Two competitors considered that the Proposed Transaction could
have an impact on HP's current dependency on […]98, while another competitor
responded that the merged entity would not have an incentive to stop sourcing
unbranded regular format printers. 99
(169) Third, with regard to the likely impact on prices and choice, the market
investigation did not reveal any impact that the Proposed Transaction would have
on the supply or the price of unbranded regular format printers in the EEA.100
Furthermore, competitors which replied during the market investigation, […],
have not raised any substantiated concerns with regard to customer foreclosure.
6 CONCLUSION
(170) For the above reasons, the European Commission has decided not to oppose the
notified operation and to declare it compatible with the internal market and with
the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of
the Merger Regulation and Article 57 of the EEA Agreement.
For the Commission
(Signed)
Margrethe VESTAGER
Member of the Commission
96 According to the Notifying Party: (1) the total capacity of Samsung's Printer Business' manufacturing
facility (currently located in Weihai) […]; (2) the total capacity of the manufacturing facility in Weihai
for complete printers is approximately […] units per year and its capacity utilization would be around
[…] units per year.
97 Questionnaire Q1 to competitors, question 39. 98 Questionnaire Q1 to competitors, question 39.1. 99 Questionnaire Q1 to competitors, question 39. 100 Questionnaire Q1 – to competitors, questions 43 and 44.